Correlation Between Foghorn Therapeutics and Century Therapeutics
Can any of the company-specific risk be diversified away by investing in both Foghorn Therapeutics and Century Therapeutics at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Foghorn Therapeutics and Century Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Foghorn Therapeutics and Century Therapeutics, you can compare the effects of market volatilities on Foghorn Therapeutics and Century Therapeutics and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Foghorn Therapeutics with a short position of Century Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Foghorn Therapeutics and Century Therapeutics.
Diversification Opportunities for Foghorn Therapeutics and Century Therapeutics
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Foghorn and Century is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Foghorn Therapeutics and Century Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Therapeutics and Foghorn Therapeutics is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Foghorn Therapeutics are associated (or correlated) with Century Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Century Therapeutics has no effect on the direction of Foghorn Therapeutics i.e., Foghorn Therapeutics and Century Therapeutics go up and down completely randomly.
Pair Corralation between Foghorn Therapeutics and Century Therapeutics
Given the investment horizon of 90 days Foghorn Therapeutics is expected to under-perform the Century Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Foghorn Therapeutics is 1.19 times less risky than Century Therapeutics. The stock trades about -0.2 of its potential returns per unit of risk. The Century Therapeutics is currently generating about -0.16 of returns per unit of risk over similar time horizon. If you would invest 105.00 in Century Therapeutics on October 20, 2024 and sell it today you would lose (14.00) from holding Century Therapeutics or give up 13.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Foghorn Therapeutics vs. Century Therapeutics
Performance |
| Timeline |
| Foghorn Therapeutics |
| Century Therapeutics |
Foghorn Therapeutics and Century Therapeutics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Foghorn Therapeutics and Century Therapeutics
The main advantage of trading using opposite Foghorn Therapeutics and Century Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Foghorn Therapeutics position performs unexpectedly, Century Therapeutics can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Century Therapeutics will offset losses from the drop in Century Therapeutics' long position.| Foghorn Therapeutics vs. C4 Therapeutics | Foghorn Therapeutics vs. Prelude Therapeutics | Foghorn Therapeutics vs. Rezolute | Foghorn Therapeutics vs. Shattuck Labs |
| Century Therapeutics vs. Edgewise Therapeutics | Century Therapeutics vs. C4 Therapeutics | Century Therapeutics vs. Mineralys Therapeutics, Common | Century Therapeutics vs. Cullinan Oncology LLC |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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